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The catch behind 'Better Car' and 'New Car Replacement' insurance

By Mark Chalon Smith

CarInsurance.com

Updated Thu Feb 26, 2015

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In a push to attract more customers, Liberty Mutual says it's raised car replacement a notch. Ruin your vehicle in an accident, the insurer trumpets in current TV ads, and it will buy you an even better ride.

The option is called "Better Car Replacement," which apparently improves on the standard coverage most car insurance companies already provide if your vehicle is deemed a total loss.

But stop dreaming, you're not getting a mighty Mercedes for a humble Hyundai.

"Better Car Replacement" works like this: Instead of writing you a check for a similarly valued car, Liberty Mutual says it will write a check for one that's a year newer and with at least 15,000 fewer miles. The replacement would have to be in the same class and basic model type as the smashed one.

The company offers an example on its website: "So if you have a 2007 vehicle with 35,000 miles on it and are involved in a total-loss accident, Liberty Mutual will give you the money for a 2008 model with 20,000 miles on it."

"Better Car Replacement" does have conditions, including:

To collect the new wheels, Liberty Mutual has to declare your car a total loss.

The original claim must come under collision or comprehensive coverage, which are optional.

You still have to pay the deductible under whichever policy option applies.

You can't get it for leased vehicles or motorcycles.

It's not offered in North Carolina.

It's also not free. The insurer says it's hard to come up with a definitive figure for how much extra you'd pay, mainly because the amount is layered into your existing policy that considers driving record, age, make of car, where you live and the other actuarial factors.

But various reports have noted that a policy could climb by anywhere from 5 to 40 percent with "Better Car Replacement," depending on the individual's driving profile.

Glenn Greenberg, a Liberty Mutual spokesman, suggests talking to an agent or getting quotes online to determine just how much the option would raise your premiums.

Liberty Mutual also offers "New Car Replacement," which is a standard feature on every policy it writes and is available in every state but North Carolina and Wyoming.

The company says that if your covered car is totaled in your first year as a customer, you can file a claim that will get you the money for a brand new car, not just the depreciated value. You'll still have to pay the policy deductible. "New Car Replacement" is only available for vehicles that:

Are not previously owned.

Are less than one year old.

Have fewer than 15,000 miles

Are not leased.

Liberty Mutual isn't the only insurer providing "new car replacement." In fact, most carriers have it but with slight variations, yet another reason it is prudent to compare car insurance companies. Some won't pay for a new car if the original was more than six months old while others have more flexible terms.

With Allstate, for example, replacement is part of the Gold or Platinum packages under the "Your Choice Auto" plan. The insurer says that if you total the vehicle in the three first years of ownership, it will provide cash for a new car, not just the depreciated value.

The packages do cost extra but come with other benefits, such as accident forgiveness. Gold or Platinum coverage already raises the premium by about 8 to 15 percent. On top of that, new car replacement adds, in general, a few more percent to both your collision and comprehensive coverage, according to the company.

Again, the insurer says you should compare policy quotes to see just how much more you'd pay.

Steps to take if your car is totaled

All of us hope we never need to replace our vehicle. But if you do, here are steps during the car insurance appraisal to ensure you get the best settlement. They're recommended by several experts, including those at Automotive.com and the Insurance Information Institute (III).

Determine the value before the accident. Research independent pricing guides such as NADAguides.com, Kelly Blue Book and Edmunds.com. Study how they value your car by factoring in the model, its year, mileage and general condition. Be as specific as possible and refer to supporting documentation.

Evaluate any accessories installed by you or the dealer. Great audio system? Put that on the list. Same with other features, like those flashy chrome wheels your wife said weren't necessary. Include them and, again, gather the receipts.

What about incidentals? Those would be taxes, registration, title and any other fees. Your car insurance is supposed to cover those so make sure they're part of the settlement.

Check to see if that rental car you needed after the crash is part of your coverage; make sure you get reimbursed if it is.

Not happy with the settlement?

If the insurer's offer leaves you cold, start looking for satisfaction by comparing the appraiser's analysis with your own, referring to those documents you've gathered. If still displeased, present your case to the insurer and ask for a larger, fairer payout.

III spokesman Michael Barry says that some insurers may have a complaint division that can help forge a compromise. But if yours doesn't budge, Barry notes that each state has a department of insurance that regulates all forms of coverage, including vehicle.

Go to your state's website to see if the department shows you how to challenge a settlement. Barry says most states have consumer advocates that can give you information and advice on filing a complaint.

Still unhappy? Then Barry says an arbitrator may help resolve the dispute. Your insurer may suggest one as part of the process or you can consider getting one on your own at American Arbitration Association.